Countries can’t simply change tax policies, says Johari

 

Former second finance minister Johari Ghani said Malaysia is the only country to have reversed its GST policy.

KUALA LUMPUR: Former second finance minister Johari Ghani says countries cannot simply change tax policies without providing sufficient notice to the people.

While acknowledging the need to reintroduce the goods and services tax (GST), Johari said a sudden change “from GST to sales and service tax (SST) and then back to GST” without giving people time to prepare would not be advisable.

“I would expect that we would tell the people (in advance) that we’re going to introduce GST 2025, for example,” he said during a Q&A session at the 2023 Youth Economic Forum at Sasana Kijang, here, today.

“So that the people can be prepared because we must remember that every time we introduce a new system, there’s a one-off spike into inflation.”

The Titiwangsa MP added that Malaysia is the only country to have reversed its GST policy, unlike the 170 countries in the world that have adopted it.

A 6% GST was introduced in 2015 under then prime minister Najib Razak, but it was abolished by the former Pakatan Harapan government and replaced with the current SST system in 2018.

In the lead up to the tabling of the 2024 budget, many parties had called for Putrajaya to reintroduce GST to increase the country’s revenue.

However, Prime Minister Anwar Ibrahim instead announced an increase in the SST rate, but excluded a range of items and services, such as food and beverages and telecommunications.

On another matter, Johari said Malaysia’s significant reliance on subsidies had affected its ability to build a strong reserve.

He said Malaysia still does not have a substantial reserve, despite starting two years earlier than Norway which now has managed to accumulate US$1.15 trillion.

“What happened is that Petronas has been (contributing) to the government in terms of their dividends, royalties, Petroleum Income Tax (Pita), but all of it ended up being used for subsidies,” he said.

Citing a Bank Negara Malaysia report, Johari said most of these subsidies did not go to the B40 income group. - FMT